Campaigns face risk with crypto donations on Coinbase and BitPay

In preparation for the 2022 midterm elections, more candidates than ever have started accepting cryptocurrency donations. As a result, major crypto platforms started to market applicants as grant processors. But the platforms intentionally obscure the identities of people who use their services, making it harder for campaigns to know whether donors are who they say they are — and to comply with campaign finance laws.

The two largest cryptocurrency platforms in the space, BitPay and Coinbase, anonymize transactions by creating a new “wallet address” (a random string of numbers and letters) for each user each time they transfer money. This is a common feature of cryptocurrency platforms, intended to prevent observers from using public blockchain explorers to identify the people behind each transaction.

But the feature can also prevent campaigns from verifying that their donors are who they say they are. The Federal Election Commission requires candidates to collect and disclose the names, addresses and employers of donors, which they can normally do by matching a donor’s name to the name on a check or the address on a credit card. credit. But with intentionally obfuscated wallets and no such verification available through BitPay and Coinbase, campaigns must rely on crypto donors honestly filling out a simple web form with few mechanisms to ensure it is accurate. This poses the risk that crypto donors could engage in fraudulent or otherwise illegal donations, leading campaigns to fail to report the cryptocurrency donated to them, whether negligently or maliciously.

BitPay offers a membership system for all transparency-minded users who want to maintain a consistent and verifiable wallet address. The campaigns, which register with BitPay as “business accounts”, also have consistent wallet addresses. But because the feature is opt-in, it’s likely that few donors have activated it, meaning campaigns couldn’t corroborate a donor’s identity claim with their public blockchain activity.

BitPay spokesperson Jan Jahosky declined to answer questions about whether the platform performs identity checks on people donating to campaigns through its platform. In contrast, Mike Naple, a spokesman for progressive payment processor ActBlue, told BuzzFeed News that the company “uses multiple checks” to “detect financial fraud.” Coinbase did not respond to a request for comment.

Although it is legal to donate to campaigns using cryptocurrency since 2014the floodgates opened last June, when the Republican National Committee of Congress announcement that it would start accepting donations in crypto. Since then, candidates from all ideological walks of life have embraced crypto donations and pro-crypto CAP announced ambitious spending targets for 2022. Blake Masters, a conservative Senate candidate, recently Told supporters on Twitter to “DM me to donate in crypto” and a NFTs sold to support his candidacy. Masters did not respond to a request for comment.

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